Can I collect borrower acknowledgement on KFS via clickwrap?

The RBI Notification on Key Fact Statements (KFS) for Loans and Advances (“new KFS Rules”) mandates that the lenders obtain an “acknowledgement” of the borrower on the KFS.

For the sake of clarity - here’s a screenshot of the exact provision:

For lenders who run digital journeys - or want to move towards digital - the main question that comes up is “Can I use clickwrap?”

What is clickwrap?

Clickwrap is something all lenders are familiar with. It’s basically a checkbox with “I accept” or “Yes/No” options. 

If you’ve ever installed software on your laptop or mobile - you would have “clickwrapped” some consent somewhere in the journey.

‍The problems with clickwrap for KFS

So first things first. There is nothing invalid about using clickwrap for KFS. 

Validity of an authentication method is simply a “Yes” or “No” question - is the method legally allowed or not?

The new KFS Rules do not specify a specific mode of acknowledgement. Nor do they prohibit any type of acknowledgement.

Therefore clickwrap is technically permissible - hence valid.

So why is clickwrap a problem?

The real value of an authentication method does not lie in its validity. Instead the real value lies in its enforceability.

Enforceability is not a simple Yes or No question. It’s a question of “How well does this mode of authentication lend itself to enforcement and auditability?”

Validity is a question of legal permissibility. Enforceability is a question of practical utility. 

Enforceability of a signature/authentication method can be evaluated on the following criteria:

1. Authentication: Whether the signature can be tied back to the specific signer
2. Integrity:  Whether the signature/authentication can be tied to the document - and prevent the document from being changed
3. Non-repudiation: Whether the signature will be hard to dispute by either party in a court of law or before a regulator

Here’s how clickwrap fares:

Ingredient of Enforceability

Clickwrap’s performance

Authentication

No way to know if borrower indeed pressed that button

Integrity

Clickwrap does not “show up” on a document. It’s a separate authentication process. It doesn’t prevent the document from being edited

Non repudiation

Easy for signer to dispute that they actually did the clickwrap for the KFS in question

Essentially - clickwrap fails on all three counts.

Why does enforceability matter?

Enforceability matters for KFS acknowledgement for 2 reasons:

1. RBI wants KFS rules to be followed - To make sure the new KFS Rules are followed the RBI will need to do regular compliance audits. In these audits, the RBI will need to be able to see if the lender has properly collected acknowledgement on KFS.

Clickwrap may not pass muster in RBI audits- because it fails to establish authentication, integrity and non-repudiation.

2. KFS will become a key enforcement document: The new KFS Rules make it clear that the KFS contains the binding financial terms of the loan.

Therefore - to successfully enforce a loan in Court lenders will need to rely heavily on KFS. 

If the KFS acknowledgement is un-enforceable then it will be very hard to prove KFS in Court. 

So clickwrap is valid. But it’s not enforceable.

Hence it may not be the best option for collecting borrower acknowledgement on KFS.

What should I use to collect borrower acknowledgement on KFS then?

We did a full run-down of potential KFS acknowledgement options in our Explainer on KFS Borrower Acknowledgement. Do click and scroll to see what you can use.

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